UK Financial Investments Limited (UKFI), the company set up to manage the Government’s investments in the banks, has admitted it is sitting on paper losses of around £10.9 billion from the government’s bail-outs of Lloyds Banking Group and Royal Bank of Scotland.

The shares in both RBS and Lloyds are currently trading well below the amount at which the government bought into the banks.

UKFI says its intention is to manage the stakes commercially as an &quotengaged&quot institutional shareholder at arm’s-length from Government.

UKFI says it will not interfere in the day-to-day running of the banks, but will continue to engage strongly on strategic issues which could impact value including board membership, risk management and remuneration policy.

John Kingman, UKFI chief executive, said: “Every UK household will have more than £3